Taxation Commissioner’s annual report shows revenue up, collection costs down

The Commissioner of Taxation’s Annual Report for 2012-13 has been released.

Always full of interesting statistics, the report says that in 2012-13, the ATO collected $311.8 billion in net tax (an increase of 3.6% on 2011-12, although 5.6% less than forecast in the 2012-13 Federal Budget) and $48.3 billion in GST (an increase of 4.5% on 2011-12). The Commissioner also reported the ATO had reduced its costs of collection to $0.91 per $100 (including GST), down from $0.95 in 2011-12.

The Commissioner noted the impacts of the economic environment on taxpayers’ capacity and willingness to pay continue to make managing tax and superannuation debt challenging.

In partnership with a major Australian university, the ATO is using data analysis to develop targeted debt-collection strategies based on taxpayers’ needs and behaviours. Through analysis, the ATO expects to be able to distinguish between cases likely to be finalised without ATO intervention and those cases requiring debt collection action. The Commissioner said following successful pilots in 2012-13, the ATO will begin implementation in 2013-14.

The ATO reported that collectable debt increased by 6.5% in 2012-13 despite improvements in the efficiency and effectiveness of its debt collection. It said this increase reflects in part the level of collectable debt inflow, which was 12.9% higher than in 2011-12. The ATO also reported it had determined that debts worth $4.6 billion to be either irrecoverable at law or uneconomical to pursue in accordance with the relevant legislation. While this is an increase of $2 billion compared to 2011-12, the ATO said the proportion attributable to debts irrecoverable at law (as a result or bankruptcy or company wind-up) was $1.8 billion.

During the year, the ATO exchanged information on over 1300 occasions under double tax agreements and tax information exchange agreements. The number of outgoing exchanges increased by over 17% compared to 2010-11. Further, the exchange of information cases contributed to around $480 million of adjusted tax, penalties and interest. Some of the details included:

• $159 million in revenue from information exchanges with Singapore;
• $23.6 million revenue in exchanges with the US;
• $147.4 million in revenue from exchanges with the UK;
• $37.6 million in revenue from exchanges with the Cayman Islands.

The ATO said it continues to obtain international data naming Australians engaged in the use of secrecy jurisdictions. It said it is working collaboratively on one particular data set with the United Kingdom and United States revenue authorities and, to date, have shared information with 15 other jurisdictions in the Asia-Pacific region. The Commissioner said this cross-border collaboration has identified the involvement of more Australians in such arrangements and these arrangements will be subject to ongoing follow-up work.

Other highlights from the report included:

• the ATO prevented $189.5 million of income tax revenue from being paid out where claims were incorrect or fraudulent;
• the ATO used third-party data matching to ensure correct reporting in following years – resulting in additional revenue of $939.3 million;
• from almost 1200 audits conducted during 2012-13 in relation to employer obligations, the ATO found that in 41.5% of businesses that were engaging individuals as contractors, the workers were employees at law and the employer was incorrectly treating them as contractors;
• the ATO issued over 10,000 assessments to people who exceeded the superannuation contribution caps, raising over $30 million in liabilities;
• approximately 47,000 tax file numbers (TFNs) were compromised, an increase of 9.3% compared to 2011-12. The ATO says it has create a new unit to deal more effectively with the emerging incidence of identity crime in the online environment;
• the ATO conducted over 730 audits and reviews on high wealth individuals raising around $1.1 billion in liabilities;
• the ATO said it initiated bankruptcy or wind-up proceedings in the courts on a “relatively small number of cases”. In 2012-13, it initiated 320 bankruptcies out of almost 21,000 bankruptcies (a 38.5% decrease on 2011-12). In relation to wind-ups, the ATO said it initiated around 1,070 cases of the 11,000 wind-ups (a 31.1% decrease on 2011-12);
• in relation to FBT compliance, the ATO said it’s checks targeting car fringe benefits have revealed that, in many cases where there was an adjustment, employers had simply failed to recognise and report their FBT obligations;
• the ATO said its increased focus on property developers and linked entities that deliberately disengage from the tax system, had raised $202.2 million in GST liabilities, including penalties and interest;
• the ATO also focused on understatement of GST caused by deficiencies in accounting systems, changes in business structures, failure of internal controls to manage unusual transactions and human error, raising $418.8 million in liabilities and collecting $393.9 million, including collections from liabilities raised in prior years;
• over 1.3 million searches were undertaken through SuperSeeker, with around 390,000 searches successfully identifying nearly $1.9 billion in superannuation accounts;
• due to legislative changes regarding unclaimed or lost super accounts (effective from December 2012), the ATO now has 730,000 more unclaimed accounts than at 30 June 2012 and the value of these accounts has increased by around $1.2 billion.

Doubtless there are more “gems” of information buried in the report which is on the ATO website.